The recent billion-dollar verdict in the Apple (News - Alert) vs. Samsung case teaches telecom companies they can’t ignore the patent process, according to a leading intellectual property attorney.
Mobile companies have fought for their patent rights – as the recent case shows – and telecom companies are closely behind, according to Chris Douglas, an attorney with Alston and Bird, who has represented a range of firms from those listed on the Fortune 100 to startups.
Douglas is scheduled to be part of the panel of specialists who will take part in TMC’s (News - Alert) SUITS conference, which will be held Oct. 2- 5 in Austin, Texas.
In a recent interview with TMCnet, Douglas explained that a patent can protect even a small firm against a much larger company. For most companies, a small group of core patents around core business units and key innovations are recommended rather than an extensive number of patents.
A national debate is ensuing about how many patents are considered necessary for a company, and the number of patents issued can impact an industry, consumers and the entire economy. For example, U.S. appeals court Judge Richard Posner recently argued in an essay in The Atlantic that, “Most industries could get along fine without patent protection.” He acknowledges that is not the case for most pharmaceutical companies – but asks us to consider the results of some current patenting practices.
“Patent races … can result in excessive resources being devoted to inventive activity,” Posner said. “A patent race is winner take all. The firm that makes an invention and files for a patent one day before his competitors reaps the entire profit from the invention, though the benefit to consumers of obtaining the product a day earlier may be far less than the cost of the accelerated invention process.”
Moreover, firms which can operate without patent protection may oppose the protection because they are afraid about how their rivals will use it against them.
To get Douglas’s perspective on some of the key issues in the field, here is the interview in its entirety.
What are the best precautions telecos can take in order to better prepare themselves to defend their critical intellectual properties?
Telecom companies cannot hide from the patent process or pretend it will go away. As can be seen with the landmark decision in the Apple v. Samsung (News - Alert) decision, mobile companies are aggressively protecting and enforcing their rights and with that, the Telco’s are following closely behind. In response to this phenomenon, smaller companies and companies outside of the mobile wars are shying away or hiding their head in the sand thinking that they could never keep pace or even compete with companies with such large portfolios. While on one level that is true, those companies can outspend some of the smaller companies. However, on another hand all the spending in the world cannot save even a large company from a well written patent that they infringed. Any company can obtain such a ruling and they do not have to be the wealthiest company in the world. This feeling of helplessness is the largest misconception in the patent world and in the telecom space.
Patents in the telecom space are rapidly expanding and evolving, what do you see as the biggest trends happening in the industry that are driving the transformation of the market that advanced tech/telecom patents are causing?
To be able to build a patent portfolio in today’s environment, telecom companies need to start building a picket fence around their core business units. Understanding a brick wall with a moat would be nice, it is just not necessary. Contrary to public belief and the behavior of the mobile companies, a company does not need to be 10,000 patents (e.g. brick wall with moat) or even 100 (e.g. brick wall), but it does need to be a small grouping of core patents (e.g. picket fence) that protect the key innovations and business units of a company. In some cases these key innovations may cover standardized behavior as defined by standards organizations and in others they may represent innovations that result in increased consumer interest in a product. A small business unit may be protected by 4-8 strategically filed patents where a company who has two business units may file twice that. A company may also acquire or obtain a license to one or more key patents in a particular business unit that covers their ongoing development. Using this strategy, a company can build a picket fence and safely operate on the ground within the picket fence. Constant filing and pruning is necessary to keep this picket fence strong and viable.
What are the main differences of the effects of corporate and enterprise patents and licenses? How can companies differentiate?
The patent process should be funded out of a company’s research and development budget. The development of new innovations is tied to the patent filing process and should be so reflected in the budget of a company. There are a number of industries, such as biotech, that have realized that the patent process is part of research and development and, as such, have been able to build and value large patent portfolios. By funding out of the research and development budget, a company can fund development and ensure that their research gains are protected and they receive an expected return on their investment. For example, if a company is willing to spend 100k on a development of an idea or concept, the same company would spend 10k to ensure that its competitors cannot freely piggyback on the large research and development spend. Using this strategy, a telecom company can protect themselves and their share of the market without a major budgetary hit.
What is the impact from the patent wars? What are the obvious or noticeable differences between telco and mobile patent wars?
Both of the aforementioned points are very commonly misunderstood by companies when they look at the various lawsuits between, Apple, Google (News - Alert) and Samsung. In particular, a company may see that Apple is filing thousands of patents per year and be scared away from the process. The real truth is a filing strategy displayed by Apple or Google only works for a company of Apple’s or Google’s size with that many different business units. Knowing this, companies can be just as powerful as an Apple in the patent space by filing patents with the knowledge of their industries’ patent field and by knowing their competitors. Such knowledge can be obtained by a CTO or other tech savvy employees and the company can then strategically file their own patents. Again, it just takes a single filing to make yourself as powerful as Apple in the patent space.
Are there challenges associated with the patenting of cloud technology versus premise-based technology?
Further, by participating in the patent process, companies can also stop competitors from obtaining patents on similar technology even when the non-patent filing company believes they came up with the idea first. While the patent holding company may have an invalid patent if an idea was already known and in the public domain, the cost of proving invalidity may be 10-50 times more expensive than the filing of a patent itself would have been. Therefore, even if a company is ultimately unsuccessful or decides to abandon their pursuit of a particular patent, the patent filing, providing its published, may still act as a defensive publication that they block others in the industry from obtaining a patent.
As becomes the challenge in many sectors of the technology industry, education can sometimes be an obstacle. What is the biggest misconception in terms of how companies can protect their patents and intellectual properties?
A patent or pending application for a company is an asset and is valued as such by the financial markets. A patent also has benefits beyond just as a sword in a lawsuit. As mentioned above, one or more patents may function as a picket fence around a company or a company’s business unit, one or more patents may act as defensive publications to block others from obtaining patents and … finally patents can operate as a deterrent for when others bring a lawsuit against you. Any number of patents can be very valuable for a company even if they do not rise to the number of patents in the patent wars. The patent system is not broken or failing, instead it is flourishing and they best way for a company to protect themselves is to participate by filing patent applications, knowing the patent landscape and by steering their development such that they avoid paying out for infringement and receive income when others infringe on their patents.
During the TMCnet conference, Douglas will speak on “Why Can They Sue Me? I have a Patent!” Other panelists include Ross Barton and Stacey White, both from Alston and Bird LLP. They will look at active litigation of IP owners; whether patents act as swords or shields; and ways to deter litigation by using patents. For a conference agenda, please click here.
Want to learn more about patents in the telecom industry? Then be sure to attend Synopsis Under IP/Patents Telecom Sourcing Conference (SUITS), collocated with ITEXPO West 2012 taking place Oct. 2-5, in Austin, TX. Stay in touch with everything happening at SUITS. Follow us on Twitter.
Edited by Stefanie Mosca